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Smoothing the way

Harmonizing municipal taxes would make Ohio more business-friendly

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Monday November 12, 2012 6:01 AM

Streamlining Ohio’s bewildering and burdensome municipal-income-tax code is long overdue. Last
week, two legislators made good on their pledge to do something about that, by introducing
legislation that could remove this competitive disadvantage for the state as it competes to attract
more jobs.

Republican Reps. Cheryl Grossman, of Grove City, and Michael Henne, of Clayton introduced House
Bill 601 after more than a year and a half of work and meetings with interested parties. Their
fellow lawmakers should prioritize this issue to clear an impediment to economic development across
the state.

Currently, any business that operates in more than one Ohio county has to deal with not just
multiple income-tax rates, but stacks of paperwork stemming from varying local definitions of what
constitutes business income and residency. There are nearly 600 jurisdictions using about 300
different forms; this is time-consuming and costly.

In a particularly egregious example highlighted earlier this year at an event hosted by Grossman
and Henne, the president of a business based in Minster, Ohio, said he had to pay an accountant $55
per form to process 41 different income-tax returns. On one return, he owed the local municipality
a whopping 13 cents.

Grossman says one executive whose company expanded into Ohio from a neighboring state told her
that, had he known ahead of time about Ohio’s income-tax hassle, he would not have based operations
here.

HB 601 would establish a minimum threshold of $5 for refunds and taxes due to cities. It would
also establish uniformity in definitions, including what constitutes a workday for tax
purposes.

The bill would not establish centralized collection of taxes, a separate idea that’s been backed
by Ohio Tax Commissioner Joe Testa. Municipalities are particularly wary of turning over all their
tax collections to the state, fearful that they won’t get back some of the money due them. The Ohio
Municipal League has also expressed strong reservations about HB 601, saying some of the changes
would result in a revenue hit to communities already hit by funding cuts.

Change is difficult, and the issue is complex. Grossman and Henne are to be commended for taking
it on. They vow that their bill remains a work in progress and one that they are open to tweaking,
with the ultimate goal being greater prosperity for all.